The Commissioner Of Income-Taxbathinda v. M/S. Jindal And Co. Kotkapura

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 239 of 2003Date of decision: 23.11.2010 The Commissioner of Income-TaxBathinda --- Appellant Versus M/s. Jindal and Co. Kotkapura --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Ms. Savita Saxsena,. StandingCounsel for the appellant-Revenue. Mr. R.L. Gupta, Advocatefor the respondent. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act, 1961(for short “the Act”) has been filed by the Revenue against the orderdated 17.6.2003, passed by the Income Tax Appellate Tribunal, AmritsarBench, Amritsar, (in short “the Tribunal”) in ITA No. 816/ASR/1996,relating to the assessment year 1988-89. The following substantial questions of law have been claimedfor determination by this Court: i)Whether on the facts and in the circumstances of the casethe Hon’ble ITAT is justified in law in confirming the decisionof learned CIT(A), Bathinda, deleting the penalty of Rs.66,480/- levied under Section 271(1)(c) of the Income TaxAct, 1961?the Hon’ble ITAT is justified in law in confirming the decisionof learned CIT(A), Bathinda, deleting the penalty of Rs.66,480/- levied under Section 271(1)(c) of the Income TaxAct, 1961? ii)Whether on the facts and in the circumstances of the casethe Hon’ble ITAT is justified in law in confirming the learnedCIT(A)’s action in not providing the Department anopportunity under rule 46A of the Income Tax Rules toconfront the assessee on the fresh plea taken and evaluatethe evidence produced in support thereof?the Hon’ble ITAT is justified in law in confirming the learnedCIT(A)’s action in not providing the Department anopportunity under rule 46A of the Income Tax Rules toconfront the assessee on the fresh plea taken and evaluatethe evidence produced in support thereof? iii)Whether on the facts and in the circumstances of the casethe Hon’ble ITAT is justified in law in not appreciating that theassessee had already taken benefit of telescoping theadditions of Rs. 32,750/- and Rs. 20,000/-, with the additionof Rs. 1,00,000/-, thus, any change of stand tantamounts toan infringement of the principle of estoppel?the Hon’ble ITAT is justified in law in not appreciating that theassessee had already taken benefit of telescoping theadditions of Rs. 32,750/- and Rs. 20,000/-, with the additionof Rs. 1,00,000/-, thus, any change of stand tantamounts toan infringement of the principle of estoppel? iv)Whether on the facts and in the circumstances of the casethe Hon’ble ITAT is justified in law in allowing relief byobserving that penalty proceedings are distinct and differentthan assessment proceedings even when the assessee hadadduced no additional evidence and made no fresh pleabefore the assessing officer during penalty proceedings?the Hon’ble ITAT is justified in law in allowing relief byobserving that penalty proceedings are distinct and differentthan assessment proceedings even when the assessee hadadduced no additional evidence and made no fresh pleabefore the assessing officer during penalty proceedings? The facts, in brief, necessary for adjudication and as narratedin the appeal, are that the respondent-assessee filed its return for theassessment year 1988-1989 on 28.8.1988 declaring income atRs.49,560/-. Later on, it was noticed by the Income Tax Officer that the The facts, in brief, necessary for adjudication and as narratedin the appeal, are that the respondent-assessee filed its return for theassessment year 1988-1989 on 28.8.1988 declaring income atRs.49,560/-. Later on, it was noticed by the Income Tax Officer that the assessee had not accounted for certain bank drafts on the dates, thesame were purchased. In particular, it was found that draft No. 646906for a sum of Rs. 1,00,000/- dated 17.3.1988 was entered in the books ofaccount on 18.3.1988. Confronted with this situation, the assessee inorder to save itself from penal action, filed its revised return on29.11.1991 declaring the income at Rs. 1,49,560/- by surrendering theaforesaid amount of Rs. 1,00,000/-.. The case of the assessee wasselected for scrutiny and the assessing officer completed assessmentunder Sections 185(4)/143(3) of the Act, at an income of Rs. 2,33,600/-,vide order dated 3.8.1992 as against the returned income of Rs.49,560/- filed initially, and Rs. 1,49,560/- shown in the revised return.The assessing officer while doing so, made additions of Rs. 59,750/- andRs.3,574/- on account of squared up accounts and unaccounted money,besides Rs. 20,000/- agreed to by the assessee. Separate proceedingsunder Section 271(1)(c) for levy of penalty were also ordered to beinitiated against the assessee.The Commissioner of Income Tax (Appeals), [hereinafterreferred to as “CIT(A)”], in the appeal carried by the assessee, allowedrelief of Rs. 22,750/- by sustaining the addition of Rs. 30,574/-, videorder dated 15.3.1993. The CIT(A), while granting the relief observedthat there was no basis for making addition of Rs. 59,750/- on account ofsquared up accounts introduced from 17.8.1987 to 19.12.1987 and thepurchase of drafts of heavy amounts was subsequent to the aboveperiod and the peak of investment would work out to Rs. 1,30,584/- asmentioned by the assessing officer himself. The assessee then filed appeal before the Tribunal. TheTribunal vide its order dated 16.7.1999, upheld the addition of Rs. 30,574/- sustained by CIT(A) but granted relief to the assessee byholding that the assessee was entitled for telescoping the benefit withthe trading account addition of Rs. 20,000/-, with the addition sustainedon account of cash credit. In the penalty proceedings initiated separately in terms of theassessment order dated 3.8.1992, the Assessing Officer imposedpenalty of Rs. 66,480/- under Section 271(1)(c) vide order dated10.9.1993. On appeal by the assessee, CIT(A) vide order dated30.8.1996, deleted the penalty which order was upheld by the Tribunalwhile dismissing the appeal of the revenue vide order dated 17.6.2003.Hence, this appeal by the revenue.We have heard learned counsel for the parties and haveperused the record. The point for determination in this appeal is, whether thepenalty under Section 271(1)(c) of the Act deleted by the CIT(A) andupheld by the Tribunal was justified? The CIT(A) while deleting the penalty had recorded asunder:- “I have carefully considered the submissions made by the ld.Counsel of the appellant. The ld. Counsel has also filed acopy of cash book indicating that the appellant was havingcash balance of Rs.74902/- on 15.3.1988 which the appellantwas able to utilize for the purpose of purchasing the draft ofRs.103574/-. The contention of the ld. Counsel carriessubstantial weight and in my view since the appellant washaving cash balance of Rs.74902/- in hand it was definitely The point for determination in this appeal is, whether thepenalty under Section 271(1)(c) of the Act deleted by the CIT(A) andupheld by the Tribunal was justified? The CIT(A) while deleting the penalty had recorded asunder:- “I have carefully considered the submissions made by the ld.Counsel of the appellant. The ld. Counsel has also filed acopy of cash book indicating that the appellant was havingcash balance of Rs.74902/- on 15.3.1988 which the appellantwas able to utilize for the purpose of purchasing the draft ofRs.103574/-. The contention of the ld. Counsel carriessubstantial weight and in my view since the appellant washaving cash balance of Rs.74902/- in hand it was definitely utilized by the appellant for purchase of draft of Rs.103574/-on 15.3.1988. The ld. Counsel has also submitted that theamount of draft of Rs.103574/- was duly debited in the booksof a/c on 16.3.1988 when the appellant was having sufficientcash balance. Therefore, keeping in view the facts of thecase, in my view, the AO should have allowed the credit ofRs.74902/- for the purpose of considering the liability ofpenalty u/s 271(1)(c). It is also seen from the assessmentorder that an amount of Rs.20000/- has been added in thetotal income of the appellant with the following observations:- “Addition agreed by the assessee as per ordersheet entry dated 6.3.1992 in trading account.” Thus, the amount of Rs.20000/- was also available with the appellant for utilization for purchase ofdraft of Rs.103574/- on 15.3.1988. Hence the total amountavailable with the appellant was Rs.94902/-. Thus thecontention of the ld. Counsel that the appellant was havingonly deficit of Rs.8672/- is correct and justified which is verynegligible. It is also seen that the AO has wrongly taken intoa/c a sum of Rs.27,000/- for the purpose of levying thepenalty since no addition was made by the AO for thisamount. The contention of the ld. Counsel that since the ld.CIT(A) has ordered the addition of Rs.27,000/- penaltyproceedings should have been initiated at his end alsocarries substantial weight. Therefore, keeping in view thepenalty imposed by the AO under Section 271(1)(c) at Rs.66480/- is considered to be not correct and justified. Hence, the penalty order of the AO is cancelled”. The aforesaid order was upheld by the Tribunal on 17.6.2003 with the following observations:- “We have heard both the parties at length and have alsogone through the material available on the record. In theinstant case, the AO initiated penalty proceedings in respectof the addition of Rs. 1,30,574 which comprised of Rs.1,03,574/- on account of addition for the purchase of draftand Rs. 27,000/- on account of squared up credits. It is truethat the A.O. made the addition of Rs. 59,750/- on account ofcash credit which the learned CIT(A) had deleted vide hisorder dated 15.3.1993. However. he made another additionof Rs. 27,000/- in respect of three cash credits in the name ofS/Sh. Babu Ram, Jai Gopal and Shimla Rani, amounting toRs. 9,000/- each. It is also noticed that the learned CIT(A)had not initiated the penalty proceedings in respect of theaddition of Rs. 27,000/-. Therefore, the A.O. was not justifiedin considering this amount of Rs. 27,000/- for the purpose oflevying penalty under Section 271(1)(c) of the I.T. Act. Asregards the amount of Rs. 74,902/- available with theassessee on 15.3.1988 for the purpose of purchase of draftamounting to Rs. 1,03,574/-, it is noticed that such plea wasnot taken by the assessee during the assessmentproceedings. However, it is well settled that the assessmentproceedings are different and distinct from the penaltyproceedings and the plea which has not been taken during the assessment proceedings can be taken during the penaltyproceedings. It is also not in dispute that the powers of theCIT(A) are co-terminus with that of the A.O. and the learnedCIT(A) can take into account the facts which the AO ought tohave considered. In the instant case, the learned CIT(A) afterproper verification of the cash book of the assessee foundthat the cash balance of Rs. 74,902/- was available with theassessee on 15.3.1988. Therefore, the learned CIT(A) wasjustified in holding that the A.O. should have allowed thecredit of Rs. 74,902/- for the purchase of draft of Rs.1,03,574/- while levying the penalty under Section 271(1)(c)of the I.T. Act. Similarly, the assessee agreed to surrender asum of Rs. 20,000/- during the assessment proceedings onaccount of trading addition and that surrender was made bythe assessee suo-moto before any detection by thedepartment. That surrender of Rs. 20,000/- can also not beconsidered as concealed income of the assessee. We,therefore, considering the facts of the present case asnarrated hereinabove hold that the learned CIT(A) rightlydeleted the penalty amounting to Rs. 66,480/- imposed bythe A.O. under Section 271(1)(c) of the I.T Act.” The appellate authorities on appreciation of material onrecord had come to the conclusion that the amount of Rs. 74,902/- wasavailable as cash in hand on 15.3.1988 for preparation of draft andfurther Rs. 20,000/- was surrendered on agreed basis in the tradingaccount before its detection by the Department. It was also observed that the benefit of the aforesaid amount was available to the assessee.Further, the Tribunal had recorded that no penalty was ordered to beinitiated by CIT(A) with respect to addition of Rs. 27,000/- which wasmade by him on account of three unexplained cash credits. In the lightof the aforesaid findings recorded by the appellate authorities, it wasconcluded that levy of penalty by the assessing officer amounting to Rs.66,480/- was not justified. Learned counsel for the appellant remained unsuccessful in his attempt to point out any illegality or perversity in the findingsrecorded by the appellate authorities. His only effort was to persuadethis Court for re-appreciation of the evidence which is not permissibleunder Section 260A of the Act. Accordingly, there is no merit in theappeal and the same is dismissed. (AJAY KUMAR MITTAL) JUDGE November 23, 2010*rkmalik* (ADARSH KUMAR GOEL) JUDGE